Under recent European regulations, since January 1, 2005, listed European companies have been obliged to report their annual figures according to the new International Financial Reporting Standards (IFRS). Most of these standards have been transferred to the local reporting rules of the EU-member states. As a result, the reporting rules for local and non-listed companies are usually the same.
Total future obligations of pension entitlements now reported
The IFRS or local rules require inclusion on the company balance sheet of the valuation of total future obligations regarding employees’ pension entitlements. Since up to now only current payments for pension plans have been shown in the profit and loss account, inclusion of an additional obligation for future pension payments on existing entitlements could have a strong – and often negative – influence on company solvency and profits.
Defined benefit plans create heavy pension obligations
In particular, salary-related pension plans (defined benefit or “DB” schemes) are expected to create heavy obligations due to the risk of back-service payments in the future.
Pure defined contribution plans do not need to show future obligations
Companies with a pure defined contribution or “DC” plan, without any obligation to make additional payments for existing entitlements, are not obliged to put a future pension obligation on their balance sheet. These companies need only to show annual pension payments in their profit and loss accounts.
Zwitserleven’s IFRS pension is categorized as defined contribution - but offers the security of a salary-related and indexed plan
With its new IFRS pension plan, Zwitserleven offers an indexed “average pay pension plan” that can be considered a DC plan according to IFRS and local Dutch reporting standards. The product therefore combines the security for employees of a salary-related and indexed pension scheme, with the advantages for the employer of a pure DC scheme.
Each plan is linked to an exclusive fee and activity arrangement with a well-known, internationally operating consultancy firm. On request this firm will provide Zwitserleven clients with a formal IFRS qualification for their scheme.
Zwitserleven is one of the top players on the Dutch market for group pensions and has a market share of approximately 12%. The company was recently awarded the title: “Best-performing Life Insurer in The Netherlands”. For (subsidiaries of) US companies it is important to note that Zwitserleven is SAS70 certified.
For more information, please visit www.zwitserleven.nl